No Focus on Education; The New Parent Trap; Building Your Nest Egg; The Pursuit of Financial Savvy

Aired June 18, 2011 - 09:30 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CHRISTINE ROMANS, HOST: Zero. That's how many times the word "education" came up during CNN's two-hour Republican presidential debate.

Good morning, everyone. I'm Christine Romans.

You know, maybe it's just too early in the campaign season. To be fair, all the focus is on debt, jobs, and health care, but on YOUR BOTTOM LINE it remains our priority. We've got some of the best minds debating how to fix America's schools here.

Also ahead, so you're college graduates, moving back home. Our guide for avoiding the parent trap.

And Chris Gardner and his "Pursuit of Happyness." Parenting and money lessons from a man who went from homeless to the boardroom. An amazing Father's Day story.

But first, a fascinating first look at the 2012 presidential race. This week, with seven Republican candidates participating in the first New Hampshire debate hosted by CNN. Debt, deficits, war, Medicare, social security, all tackled, but education reform wasn't mentioned once by the candidates. Maybe it's just too early in the campaign season, the candidates weren't asked about it.

White House Press Secretary Jay Carney said President Obama did not watch this debate, but Carney told reporters on Air Force One this week he did, and said he, quote, "was struck by the fact that over the course of two hours, the phrase middle-class and the word education did not pass anyone's lips that I heard." He says education is still a priority for this president.

Bill Bennett, CNN political contributor, former education secretary, where is education on the agenda for Republicans?

BILL BENNETT, CNN CONTRIBUTOR: Well, there are a lot of ideas (INAUDIBLE). I've spoken to many of them about education. Maybe CNN and John King and everybody realized that the president doesn't have a lot to do with it, that - how schools become good. I know the (INAUDIBLE) take, but we know that it's local action.

To connect up education, however, Christine, with - with the economic issues, we have estimated - a lot of studies have estimated that if you replace the bottom five percent of performing teachers, teachers who perform at the bottom five percent, you could increase the GDP by about a trillion dollars a year, over 10 or 15 years. That's a significant number.

ROMANS: Yes.

BENNETT: So, there are connections.

I'm sure the issue will come up. But, you know, I have to say, I was - when you hear the debate, you realize just how many important issues there are.

ROMANS: I - you know, and I agree with you there, because there are so many different things that all connect to the economy and our personal economy. But, I wonder, LZ Granderson, if that connection wasn't really made or hasn't been made in a broader political discussion yet about connecting education to all of these other issues - debt, jobs, our role in the world in the global marketplace?

LZ GRANDERSON, CNN.COM CONTRIBUTOR: Absolutely. I mean, I sat there and I was shocked. And, in fact, I got on my Twitter account and tweeted over and over again, how can we continue to talk about job creation and innovation and not discuss education? I sat there and I listened to Newt Gingrich talk about NASA and not bring up education.

I mean, I - I just saw a total disconnect between how it's important that we shore up our education system that's going to lead to job creation for the future, that's going to lead to this innovation that everyone keeps talking about. I think the simple fact that you didn't hear it prompted by the candidates themselves, tells us that they don't see the connection themselves.

ROMANS: And by the audience members, too. I mean, it was mentioned once, but in the context - the word educational is used in the context, I think, of an illegal immigration question. Pedro Noguera, the NYU Education professor.

I mean, do you think that this is because it's a local issue, or do you think it's something that will be more important for candidates to stake out about themselves as the campaign season wears on?

PEDRO NOGUERA, STEINHARDT SCHOOL OF EDUCATION, NEW YORK UNIVERSITY: Well, all the polls show that the public really is concerned about the state of education. I think that we have a bigger problem in that Republicans and Democrats really don't have many answers for the problems, and they're very similar in their policy approaches.

And the fact is that all the data shows we're falling further and further behind in the international comparisons. The recent NAEP scores, which monitor the national progress in education, and I think it's a reflection of the fact that we are stuck on certain approaches, which highly emphasize testing and don't focus enough on real skills like writing ability, math and science, that we know we need.

ROMANS: You mentioned those NAEP skills. Let's look at them. Take a look at this picture. You - you may know this face. This faced is Abraham Lincoln. When asked for two reasons why he's historically important, only nine percent of fourth graders got this question right.

This is part of the nation-wide 2010 National Assessment of Educational Progress. It's a U.S. history test. Overall, 20 percent of fourth graders, 17 percent of eighth graders, 12 percent - 12 percent of 12th graders are at or above proficiency.

I asked a teacher about this, though, Pedro, and she told me I can't spend two more minutes having someone memorize a picture of a president in the 1800s. I've got a lot of other things I'm doing in the classroom. I mean, they've got a lot of challenges, and this is -

NOGUERA: They do.

ROMANS: But these are basic skills.

NOGUERA: Absolutely.

ROMANS: I mean, what - what are we supposed to do about it?

NOGUERA: Well, here's the thing, that what's on the test in most states, in elementary school, is math and literacy. Where does social studies fit in? Where does science fit in? Where does foreign language fit in?

And what - what we know is that what gets tested is what gets covered in the classroom. And so what we can't allow is a test to drive instruction. Assessments should be used to diagnose learning needs, not to rank kids, and what we're seeing is policymakers who don't understand this issue, who continue to focus very narrowly on tests even as the evidence shows our kids are not being well educated.

ROMANS: You know, Arne Duncan said - Bill, I want to read you what Arne Duncan said about this. In a statement, he said, "These results tell us that as a country we are failing to provide children with high quality, well-rounded education. That's why we're putting a greater emphasis on courses like history, art, drama and music in our efforts to fix No Child Left Behind." What do you think?

BENNETT: Yes, well, I think that's fine, except, again, this underscores that you cannot do it from the federal government. You cannot do it with that lever.

What happens with the federal government, you get in the No Child Left Behind, you get Race for the Top, you say the money is there, you emphasize math and reading and then you wonder why everybody's making up tests in math and reading, because you're tilting the boat to one side.

So, a thing can be a national problem without a federal solution. Often when the federal government gets involved, it makes things worse. Since the creation of the Department of Education, our scores have not gotten better. They've been flatter, we've spent a lot more for worse result.

Now, there are some things the federal government should do and when it comes to history, you know, for one thing we can start with these textbooks. That's how the federal government (INAUDIBLE). But it could point out just how (INAUDIBLE) these books are, how boring they are, and how kids don't want to study history. That's - that's a major problem as well.

ROMANS: Bill Bennett, I'm really sorry about your audio problems. I - I hope everyone bears with us to that. But thank you so much, Bill.

And also Pedro Noguera from NYU. A fascinating discussion.

NOGUERA: Sure.

ROMANS: And LZ Granderson. Thanks.

OK, call it the New Parent Trap. Graduates across the country moving back in with mom and dad. But before they crowd your nest again, you need a plan, which we're going to give you next.

(COMMERCIAL BREAK)

ROMANS: After the ceremony, tens of thousands of college graduates will hang up their cap and gowns in their old bedrooms.

In his address to the 2011 Dartmouth University Class, Conan O'Brien gave this sage advice to the parents in the audience as well.

(BEGIN VIDEO CLIP)

CONAN O'BRIEN, COMEDIAN: Many of your children, you haven't seen them in four years. Well now, you're about to see them every day when they come out of the basement to tell you the Wi-Fi isn't working.

If your child majored in fine arts or philosophy, you have good reason to be worried. The only place they are now really qualified to get a job is Ancient Greece.

(END VIDEO CLIP)

ROMANS: Pedro Noguera, NYU Education professor.

Nearly 60 percent of parents who have financially supported their students after school. How? Most of them by letting them move home. A 65 percent of 18 to 39-year-olds feel their financial pressures are tougher than in previous generations, and 32 percent of their parents agreed.

Welcome to the new normal, I guess.

NOGUERA: I agree (ph).

ROMANS: Where - what do we - what are we going to do for the Class of 2011? They're moving home. NOGUERA: Well, it's tough and it's a reflection of the fact that we haven't been as practical as we should be about making choices about what to study in school and how to think about the next phase in life. And I think too many students have just chosen to do things that they think they're interested in and not enough about thinking about what I'm going to do next in life, and they need a lot of help and the colleges need to step up in providing some more guidance and helping students to think about life after college.

ROMANS: That's right. And that's something that has to start, I think, in high school, and it has to start in the home, what you're deciding to - to take in college, because there's just not a lot of margin for error.

LZ Granderson, CNN.com contributor, you say when you left home for college, you told your mom you weren't coming back. You say a lot of the drive for many students is - is moving - is moving home may be the easy way out, I guess, for some.

GRANDERSON: Well, you know, and it all depends upon the type of drive that you have and what you want to do.

You're absolutely correct. I told my mom when she dropped me off, I wasn't coming back, and I didn't. It took me six-plus years to graduate from high - to graduate from college, but I did it, and I was able to find a way to make it on my own, by taking odd jobs, working third shifts and things like that, so.

But those were the values that my mom gave me. Go out and try to make it on your own. And that's what the expectation is for my son as well. He knows he's not moving back to my basement.

ROMANS: To - to be fair, I mean, I did move home for maybe two or three months after I graduated from college, but that was to pay off, you know, the - the obligatory trip to Europe that all my friends took that I didn't have the money to do, but I did anyway.

But that was - that was the 1990s. That was Generation X, where we created 24 million jobs and there was a job waiting for just about anyone.

Pedro, let's talk about the cost of college in the middle class. As you can see from this chart, from 1988 to 1998 - this is the latest data available - median income, around $33,000. But look at college tuition and fees, they have more than doubled. Our friends at CNNMoney point out that if incomes have kept up with surging college costs, the typical American would be earning $77,000 a year.

Is college worth the cost? If you make the right choices.

NOGUERA: Well, it's worth the cost in the long term. It's certainly worth the investment. But what we have to ask is whether or not these increases in college tuitions, what are they based on, and why do they go up every year just the way they do? And, you know, I say this as a college professor who earns my living at a very expensive private university. ROMANS: NYU.

NOGUERA: NYU, which is right up there, near the top.

But I would say this, that these are questions that we should all be asking as a society, because we're saddling our youth with these huge debts that they will take years to pay off, and it does undermine them and their ability to lead independent, productive lives.

ROMANS: I think the housing market actually enabled this whole tuition inflation, because people - I mean, parents, middle-class parents, could take money out of their house. LZ, they could suck the money out of their house because they know they want their kid to have a good education, a well-rounded education, because that is the - the best way to get ahead in the world.

So they were taking money out of their house to do it. Now, the house is worth less than mortgages and they can't do that anymore.

GRANDERSON: Right, and I - I think what needs to happen, especially to high schools, is that people start looking at college differently, no longer looking at it as a four- or five-year sort of route, but looking at how they may be able to save money by -

You know, if you're going to stay home, go to class. If you're going to go to class, take some of your lower-level classes from community colleges that are actually a lot cheaper than going to the four-year institution. I mean, there are other solutions now that parents have to start looking at in order to help their kids get through school without being saddled with tremendous debt when they graduate.

ROMANS: I don't mean to sound like the Grinch, but I - when I speak to young people, you guys, I say over and over again, you don't have the luxury to switch majors three times, and no other country in the world uses college as a place for a young person to find themselves. That is a very expensive way to find yourself, at $20,000 a pop.

LZ Granderson, Pedro Noguera, thanks guys. We'll talk about it all again very soon.

All right, a retirement savings gut check. Where you need to be right now, whether you're 25 years old, 35, 45, 55, or older. The smartest ways to put your money back to work, next.

(COMMERCIAL BREAK)

ROMANS: A weak economy, high jobless rate and worries about Europe's debt and ours conspiring to take stocks lower for seven weeks in a row.

If you're checking your retirement portfolio, you've likely noticed, that's why we need Doug Flynn to give us a little pep talk. He's a certified financial planner at Flynn Zito Capital Management. First of all, what's going on here, and - and what does it mean for our - our retirement?

DOUG FLYNN, CERTIFIED FINANCIAL PLANNER: Well, there's a lot of concerns globally in - in Europe and Asia and it's weighing down the markets. And the markets had a really nice run if you look at it from the low, so there's an opportunity for people to take some profits if you were investing throughout all of this. At the last time it was really low and people said I should invest, they did invest, and now you're up big on that part.

So those are some of the things that are going on. If you're a short-term investor, these are concerns, if you're a long-term investor, this might be an opportunity.

ROMANS: Somebody who is a moderate investor, 25 to 35 years old, some of these just maybe landed their first job or just getting under way.

FLYNN: Sure. So what you want to do is you want to probably - and you can be moderate, conservative or aggressive, this is a moderate, you would add or subtract accordingly. But you want to have a certain amount of money in stocks as much as you can handle, as much as you can afford to sleep comfortably at night with the long term, because when you're in your 20s and early 30s, this money is going to be invested for - for many decades.

And so the big difference there besides old stocks is to have some alternatives. So in a period of high volatility, things are going on up and down or if we're in a sideways market for a while, the alternative strategies, the commodities, the things that go in there are ways to take advantage of that even if stocks aren't going to be the best performer.

ROMANS: And that's just a little slice of the portfolio.

FLYNN: Exactly.

ROMANS: When your 30s and 40s, you start talking about having children, saving for, you know, their - their education.

FLYNN: That's right.

ROMANS: You've got a mortgage, maybe, how should it be allocated as you get into your 35 to 44 range?

FLYNN: Right. So, generally, you're going to back off a little tiny bit on stocks. And what you're going to bring in more here is bonds. And bonds it can be a dirty word if you don't know what you're doing in a rising rate environment. But what you - what you want to do there is take advantage of a diversified - each of these periods, the stocks - each of these areas, the stocks, the bonds and the alternatives, you want to have a diversified portfolio of each. And the stocks, you want to have large, mid and small. And the bonds, you want to have different types of bonds.

ROMANS: When you say large, mid and small, you mean the large companies? FLYNN: Yes.

ROMANS: And mid-cap companies and small-cap companies.

FLYNN: International stocks.

ROMANS: So they get different kinds of exposure -

FLYNN: Exactly.

ROMANS: -- to whatever's happening in the market and the economy.

Then, 45 to 54, the moderate investor, that's the person who's looking at seven weeks of down moves -

FLYNN: Right.

ROMANS: -- and they're a little bit more concerned.

FLYNN: Right. And they're a little closer to retirement. But even retirement, you think, OK, 65, if I'm in my 40s and 50s, it's not just about having all my money available on the day I retire. That money then has to take care of you for the rest of your life.

So you can probably have a little bit more in stocks than you might think, but your fixed income also needs to be even more diversified. It's not just a matter of buying treasuries or something like that, you want to be buy a diversified portfolio of fixed income investments, and that's the kind of research you want to do or have somebody do this for you. And the alternatives, too. Remember, you have to have alternatives in all these different categories -

ROMANS: Right.

FLYNN: -- especially if inflation kicks up.

ROMANS: Also, wanted to - yes - especially if inflation kicks up.

If you're talking about a 55 to 64-year-old investor, someone who's getting closer to trying to decide when they're going to enjoy their retirement, they should be about half in stocks.

FLYNN: They should. And again, it's because the day you retire, people think, OK, I've got to have all my money available. And it's just not true. That money is going to be with you - what if you live 20 or 30 years in retirement? You're still accumulating.

Hopefully, this is the time when you're in your highest earning years and you're putting the most of money away that you can. You're still accumulating. You still want to consider yourself an accumulator. So at that point, you're still trying to get as many shares as you can, and that's why this shouldn't worry you.

ROMANS: Doug Flynn is always a voice of reason. When the stock market is up or down, he's always there (INAUDIBLE). If you're disciplined and you know what your - what your risk tolerance is and your asset allocation is that bar - as that pie chart is, you'll be fine. All right. Doug Flynn, thank you so much.

My next guest went from homeless to the head of the boardroom all while being a single parent. Next, the financial lessons he's learned along the way and the lessons he is passing on to his kids. And, oh - and did we mention, Will Smith played him in the movie.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

WILL SMITH, ACTOR, "THE PURSUIT OF HAPPYNESS": Hey. Don't ever let somebody tell you, you can't do something, not even me. All right?

JADEN SMITH, ACTOR, "THE PURSUIT OF HAPPYNESS": All right.

W. SMITH: You got a dream, you got to protect it.

(END VIDEO CLIP)

ROMANS: That scene gives me goose bumps every time. It's a scene from the movie in 2006 "The Pursuit of Happyness" starring Will Smith. That movie was based on the hard times of my next guest. He's certainly not struggling anymore.

Chris Gardner has written two books, "The Pursuit of Happyness" and "Start Where You Are: Life Lessons in Getting From Where You Are to Where You Want to Be." He also owns his own investment firm.

Chris, Happy Father's Day. Welcome to the program.

CHRIS GARDNER, CEO, GARDNER RICH: Oh, thank you. Thank you.

ROMANS: Don't ever let somebody tell you, you can't do it, not even me. Is that your message for dads and kids on Father's Day?

GARDNER: You know what, I have to tell you something, I actually wrote that scene for the film, and I believe that with every fiber of my being, and that's also the lesson, Christine, I've taught both of my children. And as a result of that, they've gone on to do things with their lives that frankly are phenomenal.

ROMANS: I mean, you're such an incredible inspiration. You went from homeless, without a job, trying to take care of your son to a position where you are a success in the board room, an amazing trajectory, and - and your children have watched this all along the way.

So just living your life is such an amazing, I guess, a role model, quite frankly, and role models, interestingly, in money and finance. According to a recent survey by the National Foundation for Credit Counseling, 42 percent of people polled said they learned about money, personal finance from their parents. That is kind of a terrifying statistic. I'm going to tell you why. Because we kind of work so hard at our day-to-day job and trying to be good moms and dads, I don't know if we put a lot of effort into teaching personal finance.

GARDNER: Well, this is a great time to be doing it. This is an environment that requires it. And the truth of the matter is, so many young people today - I've spoken at a number of colleges and universities around the country, recently. So many young people today are frightened to death, and one of the major reasons they're frightened is they've seen their parents become decimated. So, talking about money and finances at home should be part of the dinner table conversation.

ROMANS: They're watching what our priorities are with our money. And so we might be teaching them, just like everything, not just money, parents teach their kids by the way they live their lives, every minute of the day.

GARDNER: You know what, I learned so much about money from my mom, who often said, son, I have done so much with so little for so long, that I can do anything with nothing. And it wasn't just something - it wasn't just something catchy that she said, I got to see her do it.

So I couldn't agree with you more. Our children are always watching. And, again, this is the time to be teaching, perhaps, some very, very important lessons about money and beyond.

ROMANS: Do you worry at all, ever, that because your kids don't have to struggle now like you did before, that maybe they're missing out on an important lesson? Are you worried that you're sometimes, maybe - I don't know, I'm worried that sometimes I think I talk about this all day long, and I'm very worried that sometimes I don't - I'm not getting it across to them very well.

GARDNER: You know what, I have to say this. For a long time, I like a lot of parents, made every effort to give my children all the things that I didn't have as a young person, thinking I was giving them a better life. What you learn, Christine, is you're just giving them better stuff.

And as a result of that, there was a point in time where my children, honestly, my children became like the little Chocolate Kennedys. I mean, really, they had this very highly evolved sense of entitlement, and we had to work on that. We had to correct that. And I think there are some good spaces right now.

ROMANS: All right. No sense of entitlement. We want kids to work hard for everything. We also have to switch gears sometimes in -

GARDNER: Absolutely.

ROMANS: -- our own parenting to make sure that when we're off track too, we're getting them back on track.

Chris Gardner, really nice to see you, as always. Thank you and very - Happy Father's Day to you.

GARDNER: Hey. Thank you, and Happy Father's Day to all the single parents in the country. Thank you.

ROMANS: Absolutely.

All right. That wrap things up for us this morning. Send us an e-mail to YourBottomLine@CNN.com. Find me on Facebook and Twitter @ChristineRomans.